We are being offered two homes at this time to purchase wholesale and just need one:
- 1998 16X76, 3bd 2ba $19,000 Bank will finance at 8.83%, 10 years, $302 pmt. Rents; $675
2.1978 14X66, 2bd 1 ba $1000 Line of Credit at 7.25%, 1.9 Months, $63 pmtRents: 450
We are not getting any younger but neither is Warren Buffett at 78 and he is still making deals and I assume taking on more debt.
#1 above will upgrade the park (I know price doesn’t seem wholesale) but my concern is increasing debt at our age (still less than old Warren above.) I was beginning to think we should be paying everything off and doing #1 above will not do that.
Since both deals will require none of our own money and the tenant will be paying off the loans in either case why not just go for the prettier newer home. What say you?
What are your goals? What are the other homes in the park like? Will the older one detract from the overall impression given? I don’t think it’s as much a matter of not taking on more debt as how much will each decision affect what you are trying to do. The older home will not rent for as much as the newer one, so what kind of tenants will it draw and how much of an effect will that have overall? If there are lots of other homes like the older one already in place then one more wouldn’t hurt. But if it sticks out like a sore thumb and shows you are putting anything in, it may start to have an overall negative effect.
The older home is already 30 years old and how many more years can it produce income? No matter the answer, the newer one has 20 more years than the older one so there is more money to be made for someone on that home. Even after paying the new one for 10 years there are still 10 more years of free and clear income on it at a much higher rate than the older one. Then again, the older one could be paid off in a little over 2 months…a little slant towards the money now vs. future side.
I know I have rambled and there are advantages to both sides. That’s why you posted, I know, but I generally don’t want to see homes in my subdivision older than 2000 now. If I was selling maybe I would just fill up with whatever but since I was leaning towards operating for a while, I want it to be towards the nicer/newer side. I think there is still enough of a market for nicer compared to anything goes… But I think you will find a split on this topic so it still comes down to how it affects overall goals.
Sam good question–seems like our goals change every week. Income is #1 goal then probably upgrade.
Talked to a dealer this a.m. and he said he put in a bid with a repo lender at $16000 for a 90’s 16X76 and a owner in our state bid $26,000 and got it. Private sellers want $22K to $36K. I believe him. He said other owners out of state will buy from him sight unseen. There are about approx. 5000 sites in our town with about a 10 to 20% vacancy factor and just a few new 2008 homes coming in —there seems to be a scramble with owners to see who can fill up their park with other owners homes. The competition is fierce. When I get a home I can’t sell it for the markup above. Was offered a 79 Windsor 3/2. 14X71 with no work, one owner, for $7000 by above dealer. Thinking about it. It is not easy.
Sam, what are you paying for the 2000’s in your area?
Mike, I would advise you to get your dealer license and look into new home sales. At least find out what the cost of new homes are. I have been getting new 16x80 Vinyl/shingle house $24,500(approx. $2000 of that is freight) dropped at my MHP.
Shawn, mind telling me your manufacturer? I had a dealers license once and found that many of the manufacturers would not let me have homes because of dealer protected territories. However, now most dealers are gone. Might make sense if I could get the cash back out? We had a 2005 Patriot that we could not sell for cash so we have had to carry.
It makes more sense to get one of your new homes in my park rather than spend nearly the same thing for a 1998. I need to look into it.
Lexington, they are located in Lexington MS (middle of state) it is an old Fleetwood plant that was bought by some long-time employees about 5years ago, basic, low-end, not many defects.